Answer to Question #50762 in Macroeconomics for bob

2015-02-15T17:49:33-0500

Question #50762

If the price level increases, the real value of household money holdings falls. This will result in a downward shift of aggregate expenditures and a leftward shift of the aggregate demand curve.Explain in detail: True False or Uncertain

Expert's answer

2015-02-20T08:30:12-0500

False&nbsp;If the price level increases, the real value of household money&nbsp;holdings falls, because in this case money can buy fewer goods and&nbsp;services today than it could have bought in the past. This will also&nbsp;result in a downward shift of aggregate expenditures. But it won&rsquo;t&nbsp;cause a leftward shift of the aggregate demand curve because the&nbsp;increase in price level leads to a movement to the left along a given&nbsp;aggregate-demand curve.